The non resident mortgage market in Spain has been active for many years.

From the days of unregulated and uncontrolled lending in the 90s and early 2000 to the more formal and regulated market that now exists.

Mortgage Regulation in Spain

In 2019 new EU lending regulations were introduced in Spain.

These regulations affected Spanish Banks and Spanish mortgage brokers.

Whilst taking a while to bed in, the new rules have made mortgages in Spain fairer, safer and less costly for borrowers than was previously the case.

Firstly the new laws ensured that costs, like mortgage deed taxes, were picked up by the lender not the borrower. This provided a significant cost saving to the overall cost of a loan.

That Banks can no longer force a client to take on unnecessary or unrequired linked products. Spanish lenders are now required to provide a client with two offers, if they wish to offer linked products. One rate with linked products and one without. This allows the borrower to decide which is more cost effective for them.

Banks in Spain are now obliged to make a formal offer that once signed is valid and cannot be changed for 30 days.

The Spanish Mortgage offer now includes an obligatory cooling off period. Depending on Notary this is between 10 to 12 days.

The Banks in Spain are also required to provide what is called the TAE, which allows a borrower to assess overall cost and competitiveness from lender to lender. The TAE must include and amortize costs like payaways to introducers, bank account maintenance costs, and other linked products, like house insurance.

Before completion

Before completion the borrower or their Power of Attorney must now attend the Notary office so the Notary in Spain can be sure all the terms and conditions within the Spanish Mortgage deed are understood.

The cooling of period and visit to Notary are compulsory which means they must happen within the 30 day period from offer to completion. If the 30 days is exceeded a new offer must be issued and the process must start again. Without expert help and guidance in arrangement of this from an experienced broker it is easy to miss the deadlines.

Types of Mortgage brokers in Spain

Spanish Mortgage brokers are also now managed and where independent, regulated. There are 2 types of brokers.

The first does not require Bank of Spain registration. Nor does the broker have to be qualified or certified. This type of broker has very limited services. They can only work directly with 1 to 2 lenders. They operate as an introducer to these Banks. Their services cannot extend beyond referring a borrower to the specific Bank.

They can pass a clients contact details to a Bank but from that point on the relationship is between the borrower and that Bank. The client will obtain all advice from that lender and only be offered access to that lenders products. The broker cannot manage the application or negotiate or intervene in the process.

The second type of broker is fully independent. Can, and must, access a wide variety of Spanish Banks. Are required to be registered with the Bank of Spain. Have public liability and have passed all the necessary certifications.

They can professionally package the documents and present to lenders, also negotiate and manage the application on clients behalf from presentation to offer.

A good independent broker of Spanish mortgages will extend their services through to completion day.

Downsides of Spanish Mortgage regulation

The few downsides of the new regulation are outweighed by the overall improvements to transparency and safety for the borrower. The implications of regulation have however affected some parts of Spanish lending.

First of all speed. No longer is it possible to turn an application to completion around within 4 weeks. Borrowers should allow at least 8 weeks, and start the application process early on the buying cycle. This can be before a property is selected.

For some Spanish mortgage applicants one regulation clause has caused a number of issues.

Banks in Spain are now obliged for the non resident borrowers, not earning their incomes in Euros, the following option.

If currency exchange rates fluctuate by more than 20% during the lifetime of the loan, The borrower in Spain can request the loan is converted from Euros to the currency of their earnings. If a lender cannot or does not wish to risk having to provide loans in certain currencies they will no longer offer a Mortgage in Spain to those working within jurisdictions of those currencies.

The regulation also removed the facility of fixed rates to residents of a number of countries. Even if the Bank continued to offer variable rates.

Particularly hard hit were those working in the Middle East or eastern block countries. Before buying non resident borrowers should always check with an expert whether the currency of their earnings can be accepted by any lender. Also if so what access they would have to fixed rates.